The Associated Press Merger Comments ...
>> Alcatel-Lucent Offers Peak At Challenges
Laurence Frost (Paris, FR)
Linda A. Johnson (Trenton NJ, USA)
The Associated Press
Business Week December 1, 2006
businessweek.com
Alcatel-Lucent opened for business Friday as one of the world's biggest telecom gear makers, signaling a new push into enterprise markets eight months after Alcatel SA agreed to buy U.S. rival Lucent Technologies in a deal worth US$11.6 billion (euro8.8 billion).
Former Lucent CEO Patricia Russo, who heads the new group from Paris, played down cultural differences that could hinder implementation of the tie-up completed Thursday between Paris-based Alcatel and New Jersey-based Lucent.
"I don't want to be naive about the challenges of integration but I think there's an awful lot of commonality we are working from," Russo told a joint news conference in Paris with Serge Tchuruk, the former Alcatel boss who is staying on as non-executive chairman.
Alcatel-Lucent also displayed its new logo -- an infinity sign over a purple background that Russo said conveyed "warmth" as well as distinction -- as shares of Alcatel-Lucent began trading in Paris and New York. The stock fell as much as 2 percent to euro9.92 (US$13.09) in Paris.
With combined sales of euro18.6 billion (US$24.5 billion) in 2005, excluding businesses sold off, Alcatel-Lucent overtakes LM Ericsson AB's euro16.4 billion (US$21.6 billion) in revenue to control about 18 percent of the fiercely competitive market for telecom gear.
Some analysts remain concerned about the pitfalls, however. The marriage will be "difficult at best," Edward Snyder of Charter Equity Research predicted. "You're blending two cultures and you're doing that on such a huge scale, there have to be layoffs and buyouts and that poisons the atmosphere."
Russo declined to give any details of previously announced plans to shed 9,000 jobs -- about 10 percent of the combined work force. The cuts will be finalized in coming months, she said, "now that we are into execution mode as of today." The job-cutting is expected to generate about half of the euro1.4 billion (US$1.8 billion) merger-related pretax savings promised within three years.
Russo also fielded repeated questions about a promise she made in April to improve on her high-school French. Answering in English, she eventually conceded she had not found time to make much progress since. Alcatel-Lucent's working language was English, she added.
While much of Alcatel's staff has long been required to work in English, there are signs that the trans-Atlantic combination has raised sensitivities. Union leaders at one Alcatel site issued a statement Friday condemning "discrimination through the compulsory use of English" and invoking a 1994 law that requires France-based employers to use French for key internal documents.
Although the tie-up was billed as a "merger of equals," former Alcatel shareholders control about 60 percent of the combined company.
Analysts say the Alcatel-Lucent product line is well suited to triple-play networks combining Internet, phone and TV, as well as services that blend fixed-line and mobile phone offerings -- another growth area.
The new company will also push "more aggressively into the enterprise market," Russo said Friday, developing suites of products tailored for specific industries. "Think of health care, or think of financial services," she said.
Building on earlier consolidation in the sector, the combination will also help telecom equipment makers resist growing price pressure after a wave of mergers and acquisitions among their customers, the phone network operators. Alcatel agreed to buy Nortel's third-generation UMTS mobile networks earlier this year. Nokia Corp. and Siemens AG announced a joint venture in June, eight months after Ericsson bought Marconi.
Unlike either Alcatel or Lucent alone, the combined company commands a strong, evenly distributed presence around the globe. Europe, North America and Asia each supply close to one-third of revenue, spreading any risk from local economic shocks.
The new 14-member Alcatel-Lucent board comprises six former Alcatel directors and six from Lucent, as well as two newly appointed independent European directors: Jean-Cyril Spinetta, chairman and CEO of Air France-KLM, and British businesswoman Sylvia Jay, who also sits on the boards of L'Oreal UK and Compagnie de Saint-Gobain, the French construction materials maker. ###
- Eric - |
